ITAT Ahmedabad Quashes Section 69 Addition: Karta’s Bank Account Sufficient to Explain HUF Property Investment

In a significant judicial pronouncement, the Income Tax Appellate Tribunal (ITAT) has clarified the evidentiary requirements for substantiating investments made by a Hindu Undivided Family (HUF). The ruling in the case of Girishkumar C Amin HUF Vs ITO establishes that the absence of a dedicated bank account for an HUF at the time of a transaction does not automatically render its investments unexplained under Section 69 of the Income Tax Act, 1961. If the purchase consideration is demonstrably routed through the personal bank account of the Karta, and the Karta possesses the requisite financial capacity, the source of the investment is deemed legally explained.

This comprehensive analysis delves into the factual background, the procedural history, and the judicial reasoning adopted by the ITAT Ahmedabad in resolving the dispute over a ₹30 lakh property transaction.

Factual Matrix of the Dispute

The assessee in this matter is a Hindu Undivided Family. The genesis of the dispute traces back to the previous year relevant to the Assessment Year (AY) 2018-2019. During this period, the tax department received intelligence indicating that the assessee had acquired a commercial property for a total consideration of ₹30 lakh.

The Property Transaction

According to the registered purchase deed dated 5 March 2018, the assessee purchased the commercial real estate from three co-owners, namely Smt. Chhama Sachin Surve, Smt. Santoshkaur Kaushalkumar Shah, and Smt. Khushbu Nileshkumar Patel. Interestingly, the property was held for a very brief duration. It was subsequently sold on 20 March 2018 for the exact same consideration of ₹30 lakh, resulting in a net-zero capital gain or loss for the assessee.

Initiation of Reassessment Proceedings

The assessee had not filed an original return of income for AY 2018-2019. Based on the high-value property transaction data, the tax authorities initiated reassessment proceedings. A notice under Section 148 of the Income Tax Act, 1961 was issued to the assessee. Complying with the statutory notice, the assessee filed its return of income on 25 July 2022, declaring a nominal total income of ₹1,000.

During the assessment proceedings, the Assessing Officer (AO) requisitioned evidence to substantiate the source of the ₹30 lakh investment. The assessee submitted a bank statement from Andhra Bank to demonstrate the financial trail.

The Assessing Officer's Conclusions

Upon scrutinizing the submitted documents, the AO made a critical observation: the Andhra Bank account presented by the assessee was opened on 7 June 2018. This date fell months after the execution of both the purchase (5 March 2018) and the sale (20 March 2018) of the property.